Shares in telecom equipment maker Alcatel have plunged by more than 20%, after the firm warned it would fall into loss this year.

French Alcatel, which had previously expected to post a modest profit in 2002, said it would aim to slash costs by 12% this year and next.

This programme will cause the loss of 10,000 jobs, over and above the tens of thousands Alcatel plans to cut this year.

Like most firms in the telecoms sector, Alcatel has seen demand shrivel dramatically over the past year, and it fell into the red in the first three months of 2002.

Its shares have lost almost 90% of their value since the end of 2000, but the firm was generally seen as financially more robust than some peers such as Britain's Marconi.

Bad news continues

The finance director Jean-Pascal Beauffret said he expected sales to be lower because of falling demand.

"As a consequence, operating results in the second half of the year should not be sufficient to reduce losses sustained in the first half," he added.

Earlier this year, Alcatel said it would be selling or closing more than 100 factories by the end of next year.

The firm, which had 120 factories last year, aims to cut back its plant tally to 12 or fewer.